Better Late Than Never: Investing at 39

Money.

It’s a simple enough word that everyone knows. It’s also a word that stirs about a range of emotions in anyone depending upon where they are in their life and financial (in)security. The word “money” has always brought me discomfort, either because I had too little of it and had to scramble like hell to scrounge up enough of it to pay my bills, or because I didn’t know what to do with it once I finally found myself in a position to think about my future. Much like everything else I’ve learned in my life, I had little to no instruction or mentoring from a trusted ally. I simply did the research to educate myself and took a chance when it came to making bigger decisions.

Planning for retirement had never been a concept I was introduced to. It wasn’t taught in my affluent school in a graduating class of 400 Midwesterners, my family easily the poorest of them all. Saving for the future didn’t come up as a priority when earning my first paycheck at Dairy Queen or Blockbuster Video. Instead, the hours devoted to restocking VHS tapes and DVDs on the shelves or perfecting the DQ swirl on the top of a chocolate-dipped cone equated to gas in my ’82 Honda Civic wagon and a new pair of jeans from Wet Seal or American Eagle. Saving was simply something I did when I had a bigger purchase in mind because it wasn’t possible to ask my family for money.

I wish I could go back to that 16 year old girl and impress upon her just how important putting away a little bit of money would be to herself in the future, what a gift that would be to the woman she would become. Chances are, that younger version of me wouldn’t have done anything differently though because she didn’t know any better at the time. She hadn’t yet lived the life experiences of her more mature self. She didn’t know yet that she’d marry a man in the military and immediately stop worrying about the future because she had free healthcare and her husband’s military pension to rely upon. She couldn’t have expected that that same marriage would end in divorce and she’d lose that comfortable safety net she’d relied upon. She certainly never expected to give up the stability of a steady paycheck for five years to stay home to raise her son herself.

Surprisingly, it took an unexpected financial crisis caused by COVID-19 to catapult me into the reality that I needed to secure my own financial future. I started giving more serious thought to my life post-retirement shortly after my divorce, however, I wasn’t in a good place financially to start thinking about allocating any money to my future. I was a 36 year old divorced single mother with my first job in 5 years and it wasn’t a livable income for Southern California – just $15 an hour as a marketing assistant.

With hard work, determination, and perseverance, I taught myself the necessary skills to advance in my marketing career in a short amount of time. I began saving for my future as I started to earn more money, knowing that the monthly alimony I received after the divorce was final would only continue for four years – half our married years.

Here’s how I started saving for my future once I was able to make that a priority:

Emergency Fund

I put as much money into my savings account as I could afford and slowly built up an emergency fund of $10,000 over the course of a year. This is cash that is quickly available to me if something terrible happens – my car breaks down and I need to buy a new one right away, I lose my job and have trouble finding a new one for several months, an injury or illness gets me hospitalized and surprised with an unexpected bill. A safe emergency fund is six months of expenses saved up for those unexpected life experiences.

I’ve been able to increase this emergency fund by depositing my annual tax returns and other unexpected windfall money (salary increases, bonuses, and escrow account closures from refinancing my home – more on that later) into my savings account. I keep that $10,000 available to me through my credit union but have also created a different savings account for money that is still accessible but not as quickly.

High Yield Savings Account

Once I felt comfortable with $10,000 easily accessible to me in my personal savings account through the credit union I’d done business with for over a decade, I started looking into other ways to save my money at a higher interest rate in order to make my money work for me. A good friend suggested Marcus by Goldman Sachs to me and I easily signed up for an account in March right before everything went downhill.

In March, pre-COVID, the Marcus high yield savings account interest rate was 1.7% and I was thrilled to transfer cash over that could start making me more money without doing a thing. Since then, the interest rate has dropped every month and it is currently just .5% but it still earns more interest than the $10,000 sitting in my credit union savings account.

Roth IRA

One of the more defining moments of adulthood in my life was when I opened up my Roth IRA through my financial advisor earlier this year. That 16 year old version of myself I described earlier would be laughing right about now at that statement. There’s nothing sexy or intriguing about financial security, but it certainly helps me sleep better at night and that’s priceless! In consulting with a professional, I was able to have him help me determine that this was a good path for my future.

I’ve been able to max out my Roth IRA contributions for two years now and this is done so with cash that I have no intention of needing currently or in the near future. This is money that I’m comfortable parting with right now so that it can earn the money I’ll need to retire comfortably in the future. Taxes are paid upfront with a Roth IRA so that taxes are not taken out once the money is needed in retirement.

Mutual Funds

Not to totally geek out on financial industry jargon, but in order to safely diversify my retirement portfolio, I have also invested in mutual funds because I’m investing later in life for my financial future and I needed to approach it rather aggressively to attain those goals. Mutual funds are purchased through my financial advisor, who manages my entire portfolio for retirement, and this pools my money with other investors to fund other securities, usually stocks or bonds.

Stocks

I also recently purchased my first stock options this year. As opposed to a mutual fund which pools my investment with other investors’, the stocks purchased are mine alone. I chose the stock based on my own research and business interests in how I see the world changing and let my financial advisor assist by providing me with various pros and cons to a small group of companies that fit within those goals. I decided on a comfortable amount of money to part with that would (hopefully) grow with time and aid in securing my financial future.

Home Ownership

Though my marriage ended with the loss of health insurance and a pension plan I’d assumed would be there for me in the future, through mediation, my ex-husband and I agreed that I would be given the house to make things fair. It was a generous agreement that I am very thankful for as my home continues to grow in value since we first mortgaged it in 2014. It was first purchased with a VA loan so in order to free that up for my ex-husband to be able to use on his own, I refinanced my home in just my name and as a result, was comfortable with the fact the interest rate went up a little bit.

That was two years ago. Since COVID-19, I have taken advantage of the mass mortgage refinancings that have occurred across the country in response to the injection of money into the mortgage finance system. My interest rate went down which dropped my monthly mortgage payment by a couple hundred dollars that I’ve been able to use to fund my retirement accounts.

Life Insurance

Unfortunately, one of the obvious results of life is also death. I’ve had a life insurance plan for myself for the past 10 years, showing I actually had a little maturity a decade ago when committing to such a thing. When JT was born, I also took out a life insurance plan for his childhood life that will also be available to him into adulthood. Apparently it’s a gift I had no idea I was giving him because I certainly have no intention of having to be the benefactor of his life insurance paying out at a young age.

This is what I’ve created to attain my future financial goals in retirement. It’s all rather speculative and nothing is guaranteed to work for me. I’ve never been given a roadmap for success in anything that I venture out on though, and I’m happy to say that it’s worked out for me so far. If there is one thing I certainly am, it is ambitious. I can’t even conceive of a world in which I retire from work permanently because I enjoy writing so much and assume I will be able to finally focus on that once I reach that point in my life. I’m just thankful that I’ve finally decided at 39 to assist with creating a better life for my future self. She will also be thankful.